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Future Food Prices: FAPRI Projections and Sources of Uncertainty
Patrick Westhoff ([email protected])Food and Agricultural Policy Research Institute
(FAPRI) at the University of Missouri–Columbiawww.fapri.missouri.eduConference on “Agricultural Markets and Food Price Inflation”
Federal Reserve Bank of ChicagoOctober 2, 2008
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Agenda
Quick review of food inflation numbers
FAPRI agricultural market and food price projections
Sources of uncertainty in the projections
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Food and general inflation
Source: www.bls.gov
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Food inflation: at home and away
Source: www.bls.gov
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Food inflation: a few categories
Source: www.bls.gov
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Food inflation: a few categories
Source: www.bls.gov
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Food inflation: FAPRI projections
Source: FAPRI-MU (food) and Global Insight (all items), August 2008
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Food inflation: Aug. vs. Jan. projections
Source: FAPRI-MU projections, January and August 2008
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Food expenditures: farm value and marketing bill, 2006
Source: USDA Economic Research Service
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U.S. grain useBased on USDA estimates, September 2008
Grains: Wheat, corn, sorghum, barley, oats and rice
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WTI petroleum prices: Aug. vs. Jan. projections and current futures
Sources: Global Insight, January & August 2008; NYMEX July light crude contracts, 9/30/08
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Ethanol rack prices: Aug. vs. Jan. projections and current futures
Sources: FAPRI-MU projections, January & August 2008; CBOT March contracts, 9/30/08
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Corn prices: Aug. vs. Jan. projections and current futures
Sources: FAPRI-MU projections, January & August 2008; CBOT Dec. contracts, 9/30/08 (- $0.30 basis)
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Ethanol production: Aug. vs. Jan. projections
Source: FAPRI-MU projections, January & August 2008
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Ethanol production capacity
Source: Renewable Fuels Association website
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Ethanol dry mill operating costs and returns
Source: FAPRI-MU projections, August 2008
Note: 9/30/08 futures would imply a narrower operating return in 2008/09
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Omaha rack prices for ethanol and gasoline
Source: FAPRI-MU projections, August 2008
Note: Maintains 2009 tax credits, tariffs
April 2009 futures on 9/30: $2.66 for NYMEX RBOB gasoline, $2.09 for CBOT ethanol
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Ethanol consumption by category
Source: FAPRI-MU projections, August 2008
*To meet air quality requirements and state mandates
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Biofuel consumption and the Renewable Fuel Standard (RFS)
Source: FAPRI-MU projections, August 2008
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U.S. soyoil consumption by category
Source: FAPRI-MU projections, August 2008
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Crop prices: FAPRI-MU projections
Source: FAPRI-MU projections, August 2008
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U.S. crop exports Based on USDA estimates, September 2008
Corn Soybeans WheatQuantity (mil. bu.)2005/06 2,134 940 1,0032006/07 2,125 1,116 9082007/08 2,425 1,155 1,2642008/09 2,000 1,000 1,0002008/09 vs. 2005/06 -6% +6% 0%Farm value of exports (bil. dollars)2005/06 $4.3 $5.3 $3.42008/09 $11.0 $12.4 $7.32008/09 vs. 2005/06 +158% +132% +111%
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China imports of soybean productsBased on USDA estimates, September 2008
Commodities valued at Illinois prices
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U.S. crop production Based on USDA estimates, September 2008
Corn Soybeans WheatQuantity (mil. bu.)2005/06 11,114 3,063 2,1052006/07 10,535 3,188 1,8122007/08 13,074 2,585 2,0672008/09 12,072 2,934 2,4622008/09 vs. 2005/06 +9% -4% +17%Farm value of prod. (bil. dollars)2005/06 $22.2 $17.3 $7.22008/09 $66.4 $36.2 $17.82008/09 vs. 2005/06 +199% +109% +148%
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U.S. crop acreage planted: 2 viewsFAPRI-MU Aug. 2008 projections
Other crops: Upland cotton, rice, sorghum, barley, oats, peanuts, sunflowers, sugar cane and sugar beets
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Corn market receipts, government payments and variable expenses
Source: FAPRI-MU projections, August 2008
Note: Payments assume 1 acre of base for each acre planted
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U.S. grain exports and corn used for ethanol production
Source: FAPRI-MU projections, August 2008
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Feed prices: FAPRI-MU projections
Source: FAPRI-MU projections, August 2008
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Livestock prices: FAPRI-MU projections
Source: FAPRI-MU projections, August 2008
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Hogs: Farrow-to-finish receipts and expenses
Source: FAPRI-MU projections, August 2008
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Cattle: Cow-calf receipts and expenses
Source: FAPRI-MU projections, August 2008
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U.S. meat exports: FAPRI-MU projections
Source: FAPRI-MU projections, August 2008
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U.S. meat production: FAPRI-MU projections
Source: FAPRI-MU projections, August 2008
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U.S. meat consumption per capita: FAPRI-MU projections
Source: FAPRI-MU projections, August 2008
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Retail meat prices: FAPRI-MU projections
Source: FAPRI-MU projections, August 2008
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Some (of very many) uncertainties
Petroleum pricesWeather Technological growthExchange ratesEconomic growthBiofuel policiesAgricultural policies
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2011/12 corn price and petroleum price
0.001.002.003.004.005.006.007.008.009.00
0 50 100 150 200 250 300
Corn price, $/bushe
l
Petroleum price, $/barrel
Source: FAPRI August 2008 stochastic baseline update
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Thanks!
Contact me at [email protected] or 573-882-4647Visit FAPRI-MU web page at www.fapri.missouri.edu